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Why BOE Rates Could Go Negative When Economy Turns Positive

  • Central bank says subzero rates might work best after pandemic
  • Weakness of lenders now might curb policy’s effectiveness
A cyclist passes the Bank of England in the City of London.

A cyclist passes the Bank of England in the City of London.

Photographer: Simon Dawson/Bloomberg
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The Bank of England has raised the prospect of cutting interest rates below zero -- after the coronavirus crisis has passed.

The idea that subzero rates might be more effective in a post-pandemic revival rather than the current slump is a counterintuitive one, but there is a precedent, in the view of BOE Governor Andrew Bailey. The European Central Bank implemented negative rates in June 2014, a year after the euro zone exited a double-dip recession.